THIS BLOG RATES THE S&P 500 BUY/SELL/OR HOLD EACH DAY WITH 2-GOALS FOR LONG TERM INVESTMENTS: (1) PRESERVE CAPITAL (2) BEAT THE S&P 500.
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Tuesday, April 30, 2013

Chicago PMI Contracts i.e., Manufacturing Shrinking

CHICAGO PMI SLUMPS TO 3.5-YEAR LOW (MarketWatch)

“Chicago PMI slumped to 49.0 in April, down from 52.4 in
March and at a reading indicating contraction. That’s the worst reading since
September 2009.Economists polled by
MarketWatch had expected a 52.5 reading.”

“The Conference Board’s index rose to 68.1, exceeding the
highest projection in a Bloomberg survey, from a revised 61.9 in March, data
from the New York-based private research group showed today. Economists
surveyed by Bloomberg forecast an increase to 61.Gains in the stock market, an increase in
property values and cheaper prices at the gas pump are helping stabilize
household wealth…“The fact that they feel a little bit wealthier will give them
a little more leeway,” said Brian Jones, senior U.S. economist in New York at
Societe Gererale.”Story at…

"It's only the third time in history that we've gone
from January into May 1 without a 5 percent correction.," he said.
"The other two times, you didn't get a great result afterward..."

Brian Kelly of Shelter Harbor Capital:

"History is on my side, and I'm still selling."

Dan Nathan of RiskReversal.com:

"This week, we saw names like Bristol-Myers, Amgen, Procter & Gamble,
AT&T – these are all defensives with pretty
decent yields that have been pretty crowded trades – they all got nailed,"
he said. "I think you have to keep your eyes open."

“Sometimes in history, investors feel so confident about
the future of stocks that they actually use up all their available cash and
then borrow money to invest in the market. Now is one of those times!…only one other time in history has negative
net worth been this low, which was the tech bubble back in 2000.” – Chris
Kimble posted at dshort.com.

Chris Kimble points out that there were two other times
when negative net worth approached this level, but did not get as extreme.Those were in 2007 (50% S&P 500 decline)
and 2011 (17% S&P 500 decline). Full post with charts at…

I have on several occasions written about the lack of
jobs in the economy as represented by the number (or percentage) of Americans
actually working.The wall Street
Journal had a good article on the subject.WSJ noted that lack of jobs is clearly a problem and many have quit
looking for work, but there are other factors that mitigate the problem.See below:

REAL CULPRIT BEHIND SMALLER WORKFORCE: AGE (WSJ)

“Americans are leaving the labor force in unprecedented
numbers. But the trend has more to do with retiring baby boomers than
frustrated job seekers abandoning their searches.The share of the population either working
or looking for work in March hit its lowest level since 1979. The measure,
known as the participation rate, now stands at 63.3%, down from 66% when the
recession began. That represents close to seven million workers who are now
"missing" from the labor force…the labor force is missing about three
million workers who aren't in school or retired. That is still significant: Add
those workers to the unemployment rolls and the jobless rate would jump to
9.3%. But it suggests the decline in participation is about more than a weak
economy.”Full story at…

If you haven’t heard, there has been a flap among
economists over an error in a spreadsheet by Ken Rogoff and Carmen Reinhart
where they argued that a debt of 90% of GDP would bring low-growth or
recession.This was in a paper by the
economists, not in their book, “This Time is Different”.The conclusion that 90% is a critical level
for debt to GDP ratio is apparently not correct, but the general conclusion
that too much debt leads to slower growth is valid.Here’s an interview with Niall Ferguson.

“The headlines have done a disservice to Ken Rogoff and
Carmen Reinhart,” Ferguson notes. “It’s extremely implausible that governments
with already high debt can improve their situation by making their debt even
larger. High debt scenarios end with inflation or default. They don’t end with
a rapid increase in the growth rate. A minor error in the Rogoff and Reinhart
paper does not refute the case that governments with excessively large public
debt have to bring them under control.” - Niall Ferguson, Harvard University
history professor and author of “Civilization: The West and the Rest”

He went on to suggest that the United States position is
actually much riskier than Japan because Japan’s debt (200% debt to GDP ratio)
is funded by its citizens while the US debt is funded by foreigners.Video at…

MARKET RECAP
Tuesday, the S&P 500 was up 0.25% to 1,598 (rounded), another new high. VIX
was down 1.4% to 13.52.

Today was a high volume day with volume
about 20% higher than this month’s daily average.Perhaps it was end of the month window
dressing for the fund managers?

NTSM

Tuesday, the NTSM analysis was again at HOLD at the close.All indicators are neutral, but Sentiment is
rising quickly and may switch to sell soon.It is not likely that the NTSM system will switch to sell since other
indicators are solidly in neutral.

Put this on permanent repeat…A statistically significant day (about a 1%
climb in the S&P 500) will signal a top to me.I am guessing the top will be when the
S&P 500 climbs another couple of percent higher.

The NTSM system sold at 1575 on 16 April.(This is just another reminder that I should
follow the NTSM analysis and not act emotionally – I am under-performing my own
system by about 2%!)

I have no problems leaving 20% or 30% invested.If the market is cut in half (worst case) I’d
only lose 10%-15% of my investments.It
also hedges the bet if I am wrong since I will have some invested if the market
goes up.No system is perfect.

Followers

About Me

I am an engineer with a lifelong interest in "playing with numbers" so what could be more fun than trying to develop a system that beats the stock market? Well, lots of things, but I decided to do this anyway.
While I am not a finance-professional, or professional investor, I have developed some skills.
I competed in two CNBC Million Dollar Portfolio contests finishing in the top 4% in 2008 (34,320th of 800,000) and the top 0.1% (448th of 500,000) in 2009. More importantly, I managed to sell out of my retirement accounts at or near the top in 2000 and 2007 and bought close enough to the bottom that I didn’t lose too much sleep. (Even Bill Gates lost SOME sleep.)
I hope that my thoughts will help you achieve your investing goals. Please remember that my ideas are free and there may be times when my ideas are worth less than what you paid.